Magazine article American Banker

Fleet to Buy $500 Million of FDIC Loans

Magazine article American Banker

Fleet to Buy $500 Million of FDIC Loans

Article excerpt

Fleet to Buy $500 Million Of FDIC Loans

Saying the New England economy is near the bottom of its slump, the chairman of Fleet/Norstar Financial Group unveiled a plan Thursday to buy about $500 million in classified loans from the Federal Deposit Insurance Corp.

"We've all been feeling sorry about the economy," said Fleet's chairman, Terrence Murray. "This initiative will help sound but struggling borrowers get back on their feet."

The FDIC and Fleet said the program will permit the bank to renegotiate the terms of some loans. Most loans held by the government are being liquidated, putting borrowers or some of their projects out of business.

From BNE and Maine Savings

Fleet, based in Providence, R.I., will buy the loans from a pool of $6 billion in assets that had been skimmed by the government from Bank of New England Corp. and Maine Savings Bank.

Fleet bought the banks earlier this year. It has been servicing the loans, reaping fees from the government for successful collections on the bad loans through its Recoll Management Corp. subsidiary. But Fleet feels it can make more money working out the loans at its bank units. Typically, Recoll liquidates loans.

Fleet will buy the loans at 100 cents on the dollar over the next four months. "That makes it a good deal for the FDIC," Mr. Murray said.

Fleet Has Put Option

But the arrangement is even sweeter for Fleet, which will have an option to put back any of the loans until July 1994 if they prove to be unmanageable. …

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